From 01 March 2021, HMRC put in place the ‘VAT domestic reverse charge’ to clamp down on construction industry contractors claiming VAT back which they aren’t entitled to — ultimately, VAT will only be paid by an ‘end user’ (usually a domestic customer). Construction industry contractors and subcontractors may need to handle VAT on invoices in a slightly different way. Don’t get caught out! Contact us to receive your free PDF guide and ensure you are set up to comply with HMRC’s new guidelines for CIS contractors dealing with VAT.
Most contractors working within the construction industry must register with HMRC for Construction Industry Scheme (CIS) purposes to deduct tax payments from subcontractors’ and pay this over to HMRC, and we can advise how and when this should be done. Subcontractors’ tax deductions count as advance payments of their tax and National Insurance contributions so it is important they are correct. The necessary rate of tax must be deducted from subcontractors used and paid over to HMRC by the monthly deadline to avoid financial penalties. HMRC have very specific guidelines as to what types of construction work do and do not fall under CIS, so the need for receiving clear and correct advice from an accountant should never be underrated. Not registering for CIS when required to do so can leave your business exposed to the risk of unpaid tax as well as penalties from HMRC.
We have extensive experience preparing accounts and tax returns for contractors and subcontractors working in the construction industry, as well as filing a company’s or individual’s tax returns when CIS deductions need to be included.
If I work as an employee within the construction sector, does CIS apply?
No. CIS usually only applies to those who are self-employed working within the construction sector.
How long does a CIS refund take to process?
Typically 1-3 weeks, but it is important to hold up to date records and provide accurate information in order for HMRC to verify and process the refund claim.
What dictates whether a subcontractor gets deducted 20% or 30%?
Put simply, if HMRC hold all the necessary information on a subcontractor and are satisfied it is correct then they can be considered ‘verified’ and eligible to be deducted 20% tax. If HMRC are unable to verify any of the information or the subcontractor is not registered with HMRC then the subcontractor must be deducted 30%
What expenses can I claim as a subcontractor?
The most obvious are equipment, tools and materials as well as PPE and clothing. Other expenses to consider include travel costs and office and admin costs. You should contact us to find out more information for your specific industry.
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